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American Trial Lawyers Association v. New Jersey Supreme Court

Decided: December 17, 1974.


For affirmance -- Chief Justice Hughes, and Justices Jacobs, Hall, Mountain, Sullivan, Pashman and Clifford. For reversal -- None. The opinion of the Court was delivered by Hughes, C.J.


[66 NJ Page 259] This litigation challenges the authority of the Supreme Court under its rule-making power, N.J. Const. (1947), Art. VI, § II, par. 3,*fn1 to establish a graduated schedule of maximum contingent fees applicable to certain tort litigation conducted by New Jersey attorneys. It thus suggests to the Court an introspective look at its constitutional power to regulate the practice of law as well as its consequent responsibilities in that regard. [66 NJ Page 260] The contingent fee rule, R. 1:21-7, was adopted by this Court*fn2 in December 1971, to be effective January 31, 1972. Its limitation clause (c)*fn3 was promptly challenged on federal and state constitutional grounds by litigation instituted by several highly respected associations of trial lawyers (hereafter "plaintiffs"). Plaintiffs may be considered, arguendo, to be representative of a class, namely the entire New Jersey trial bar; we are not so clear as to their standing to represent the poor,*fn4 but that is not necessary to decide now. The initial attack on the rule was spelled out in complaints filed in the United States District Court, seeking declaratory and injunctive relief. There was convened, under 28 U.S.C. §§ 2281, 2284, a three-judge court which

dismissed the cause on grounds of abstention, Reetz v. Bozanich, 397 U.S. 82, 90 S. Ct. 788, 25 L. Ed. 2d 68 (1970). On appeal the United States Supreme Court vacated that judgment, ordering the District Court to retain jurisdiction pending conclusion of proceedings in the state courts. American Trial Lawyers Ass'n v. New Jersey Supreme Court, 409 U.S. 467, 93 S. Ct. 627, 34 L. Ed. 2d 651 (1973).

The state court litigation has a procedural history not particularly important here, except to recall that, proceeding summarily under R. 4:67-5, the Superior Court, Law Division, in an unreported opinion, held R. 1:21-7(c) to be invalid. (Docket No. L-16981-72, filed July 5, 1973). It rested that judgment on state constitutional grounds, interference by the rule with freedom of contract and absence of apparent justification therefor in the record. It deemed freedom of contract, including that between attorney and client as to contingent fees, to be constitutionally protected as a basic liberty, subject only to the exercise of the police power.

The Appellate Division reversed and in a comprehensive opinion determined that the adoption of the rule, fixing outer limits on contingent fees, not only was constitutionally unassailable, but clearly came within the ambit of this Court's responsibility to regulate relationships between Bar and public. American Trial Lawyers Ass'n v. New Jersey Supreme Court, 126 N.J. Super. 577 (1974). We adopt this well-reasoned opinion in toto, and ordinarily would end by saying so.

However, some few observations might be useful, touching on the basis of the Court's constitutional power and responsibility.

In 1947, the people of New Jersey adopted a new Constitution to replace that of 1844 (the successor to the Revolutionary Constitution of 1776), recognizing that over the span of that century-plus the state had emerged from its largely agricultural past to become a more complex component of the American community. Heavily industrialized, congested by

dynamic population and business growth, suffering the pains of unprecedented and largely unplanned urbanization, criss-crossed by the travel of millions of visitors or transients, choked by an archaic tax system, New Jersey had become, in the words of Woodrow Wilson (who served as its Governor part way through that interval) a kind of "laboratory" of the nation's problems and its hopes.

By Article VI of the 1947 Constitution, the people discarded the former court system, attenuated and overburdened as it was by the developments and complexities of the years. The new charter had at its core the creation of a modern system of courts. That court system, in its political independence, its design of administrative self-government, its hoped-for efficiency and consequent productivity potential in the public interest since has come to be regarded as something of a model by other jurisdictions. W. J. Brennan, Jr., After Eight Years: New Jersey Judicial Reform, 43 A.B.A.J. 499 (1957); M. Pirsig, The Proposed Amendment of the Judiciary Article of the Minnesota Constitution, 40 Minn. L. Rev. 815, 823-24 (1956); R. Pound, Procedure Under Rules of Court in New Jersey, 66 Harv. L. Rev. 28 (1952). Central to this system was a unique administrative flexibility, largely accommodated by the rule-making power, soon to be vindicated (in the context of procedural and practice, vis-a-vis substantive, matters) in Winberry v. Salisbury, 5 N.J. 240 (1950), cert. den. 340 U.S. 877, 71 S. Ct. 123, 95 L. Ed. 638 (1950).

In this context, then, we come to the basic question of this case: What is the nature and extent of the Court's regulatory power over those who practice law?

One source of the power of the Court to regulate practice and procedure therein, of course, is its traditional, inherent and integral relationship to the very existence and the functioning of the court. But so precisely and unmistakably (as held below) did Article VI, § II, par. 3 of the Constitution, supra, make "the Supreme Court the ...

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